Thursday, July 28, 2011

A Fine Mess in Tennessee

State House Majority Leader Gerald McCormick was recently asked about the new effort by the Tennessee State Employees Association to have state employees identify areas of wasteful spending with the hope that elimination of waste would save state employee jobs. What he said was amazing and a wake up call for all Tennesseans.

The State Employees Association’s effort was launched in response to Governor Haslam’s recent decision to let go 70 planners in the Department of Economic and Community Development. But one fascinating statement by Leader McCormick about that effort that needs digesting is that federal tax dollars represent “as much as 40% of state lending.” Wow!

I love to quote the statement, “The debtor is the slave of the lender,” and while these federal dollars don’t represent “borrowing” by the state, it does represent a dependence on the federal government that is an erosion of our liberty as a state—the notion of federalism. Federalism was the idea that states would retain their sovereignty as a part of a group of “united states” with the federal government having limited, specific powers, with all other powers belonging to the states (see the 10th Amendment).

But with 40% of our budget coming from the federal government, don’t think that there are no strings attached telling us what we can and cannot do. There are a lot of strings that wind up dictating state policy.

And that’s not all. These federal dollars are what makes cutting the state budget so hard. Often our state tax dollar is being used to draw down another dollar or two from the federal government (which explains, in part, why we’re up to 40% in federal revenue). So, you cut a dollar from the state budget, and you may actually be reducing the service provided by the state from that dollar by as much as two or three dollars because you lose the federal “match.” As a former state Senator caught up in a budget mess, I know this from first-hand experience.

This also means that the cuts in Washington designed to attack Washington’s budget deficit and national debt will trickle (if not stream) down to the state, putting a greater demand for state cuts (which cuts are made harder for the reason just aforesaid) or for increased state revenue to make up for the “lost” federal money.